India Inc to Raise Salaries by 9.1% in 2027 Amid Rising Attrition

Indian companies are expected to increase employee salaries by an average of 9.1% in 2027, slightly up from the 9% rise anticipated for 2026. This forecast comes from Aon's Annual Salary Increase and Turnover Survey for India 2026-27, which analyzed data from over 1,200 organizations across 45 industries.

The report highlights a growing challenge for businesses as employee attrition rates have climbed to 18% in 2026, up from 16.2% in 2025. This uptick signals ongoing competition for skilled workers even though overall pay budgets have remained relatively stable.

Non-banking financial companies (NBFCs) are set to lead the way with salary increments averaging 10.1% in 2027, followed closely by the energy sector at 9.9%, and real estate and infrastructure sectors at 9.8%. Other sectors like funds and asset management and life sciences are both projected to offer increases of 9.6%. Global capability centres (GCCs), a key part of India’s outsourcing landscape, are expected to provide raises around 9.4%.

On the lower end of the spectrum, technology consulting and services firms are forecasted to deliver the smallest pay rise of 6.6%, unchanged from the previous year. Banking and chemicals sectors are expected to offer increments of 8.5% and 8%, respectively, both marginally down from 2026 figures.

Real estate and infrastructure, which saw a robust 10.3% increase in 2026, is predicted to moderate slightly to 9.8% in 2027. Automotive and vehicle manufacturing will also experience a slight easing in salary hikes, moving from 9.7% to 9.5%.

Roopank Chaudhary, Partner and Rewards Consulting Leader at Aon India, commented on the findings: "Strong domestic consumption, sustained investment, and export growth continue to support business confidence. This allows employers to invest in talent while maintaining cost discipline." He added that companies are adopting a targeted approach to compensation, with a modest rise in non-merit pay adjustments, especially in manufacturing and technology sectors, to better align with market demands and address scarce skills.

The survey also notes that attrition is particularly high in financial services. NBFCs reported attrition rates of 37% in 2026, slightly up from 36% the year before. Life insurance companies continue to face significant turnover, with rates around 51.6%. Retail attrition climbed to 20.5%, and the real estate and infrastructure sectors saw an increase to 21.7% from 17.4%. Banking experienced a small rise to 22% from 21.2%. In contrast, attrition in technology consulting and services remained stable at 18.4%, while technology platform and product companies saw a slight decline to 13.8% from 14%.

Alongside salary and attrition trends, business sentiment remains optimistic. According to the survey, 60% of companies anticipate revenue growth exceeding 5% in 2026-27, although only 37% expect double-digit growth. Despite this, 62% of employers plan salary increases above 9%, suggesting that wage expectations are holding steady.

Real wage growth, which accounts for inflation, is estimated to reach 5.1% in 2027, up from 4.3% in 2026. However, the impact of inflation and rupee depreciation may offset some of the gains when compared internationally.

The increasing adoption of artificial intelligence (AI) in the workplace is influencing how companies allocate their workforce budgets. The survey found that 56% of employers had established AI productivity tools by 2026, up from 46.1% in 2025. This trend spans various job categories, with about 60% of employers prioritizing employee upskilling to meet new technology demands. Roles in AI, machine learning, and data science have seen talent premiums rise by approximately 10% since 2025, reflecting strong demand for specialized skills.

Chaudhary noted, "The rapid adoption of AI signals a shift from experimentation to enterprise-wide application. The next priority is translating that momentum into measurable productivity and growth." This indicates a strategic focus on leveraging technology to boost business outcomes while managing workforce costs.

Additionally, companies are preparing for the financial effects of new wage regulations under the Wage Code. Aon reports that 65.4% of employers are already compliant, with another 20.9% aiming to be ready within six months. Nearly 43% expect payroll costs to rise by at least 1%. Employers are advised to assess these impacts carefully and align compensation strategies with their overall rewards philosophy, ensuring clear communication with employees during the transition.

With salary increments, retention challenges, AI investments, and wage regulation compliance all converging, Indian businesses are likely to become more selective in how they distribute pay increases. Emphasis will be on rewarding critical positions and scarce skills rather than applying uniform raises across all employees.